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CIOT: Budget: R&D Tax Credits – ‘above the line’ relief welcomed

The Chartered Institute of Taxation (CIOT) has welcomed the confirmation by the Chancellor of the decision to introduce an ‘above the line’ research and development (R&D) tax credit in Finance Bill 2013. The CIOT has previously said that an 'above the line' tax credit system will provide a far stronger incentive for businesses to invest in R&D.

The CIOT had commented that under the current system some companies feel it is difficult for R&D divisions to demonstrate ownership of the R&D tax claim, as the claim gets subsumed into the group’s overall tax result through an enhanced deduction for qualifying expenses. As a result the R&D tax incentive can get overlooked in investment calculations.

David O’Keeffe, Chairman of the CIOT’s R&D Working Group, said:

“Most importantly, a change to an 'above the line' system would mean that the tax credit would be part of the cost calculation of an R&D project undertaken by the engineers or other personnel who are going to carry out the work, rather than being a relief which is claimed by the tax department after the event. This is likely to make R&D projects more affordable at the relevant decision making point, which should encourage R&D spend in the UK.

“We welcome, too, the Chancellor’s commitment to ensure that small and medium enterprises’ (SME) R&D incentives are not reduced as a result of this change and look forward to being involved in the consultation on the detail. Although the drivers for an 'above the line' system are not so apparent for SMEs, we would advocate that the same system is applied for large companies and SMEs as to restrict the changes to large companies would only give rise to more complexities at the margins for growing (or shrinking) companies.”

Notes to Editors

An ‘above the line’ R&D tax credit is considered to be easier to recognise in corporate investment decision making calculations with respect to R&D activities. This is because the relief would be in the form of a credit against the company’s tax liability, which would be repayable even if there were no tax liability in the year of claim. This would be accounted for ‘above the line’ and could more easily be factored into the costs of the R&D division

2. The Chartered Institute of Taxation (CIOT) is a charity and the leading professional body in the United Kingdom concerned solely with taxation. The CIOT’s primary purpose is to promote education and study of the administration and practice of taxation. One of the key aims is to achieve a better, more efficient, tax system for all affected by it – taxpayers, advisers and the authorities.

The CIOT’s comments and recommendations on tax issues are made solely in order to achieve its primary purpose: it is politically neutral in its work. The CIOT will seek to draw on its members’ experience in private practice, government, commerce and industry and academia to argue and explain how public policy objectives (to the extent that these are clearly stated or can be discerned) can most effectively be achieved.


The CIOT’s 15,800 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’. 

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